Lennar Stock

Lennar Corporation operates as a homebuilder in the United States.

The company is an originator of residential and commercial mortgage loans, a provider of title insurance and closing services and a developer of multifamily rental properties.

In addition, the company is a sponsor and manager of funds and joint ventures engaged in the development and ownership of multifamily rental properties and a sponsor and manager of a fund engaged in ownership of single-family rental properties. The company also has investments in companies that are engaged in applying technology to improve the homebuilding industry and real estate related aspects of the financial services industry.

The company is also partnering with Sunnova for it to be its exclusive residential home solar and battery storage provider, and the company is working with Sunnova on the development of community solar microgrids.

Segments

The company operates through Homebuilding, Financial Services, Multifamily, and Lennar Other segments.

Homebuilding segment

As of November 30, 2023, the company’s Homebuilding operating segments and Homebuilding Other consisted of homebuilding divisions located in:

East: Alabama, Florida, New Jersey, Pennsylvania and South Carolina.

Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina, Tennessee and Virginia.

Texas: Texas.

West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington.

Other: Urban divisions and other homebuilding related investments primarily in California, including FivePoint Holdings, LLC (FivePoint).

Homebuilding Operations

The company’s homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through entities in which it has investments. New home deliveries, including deliveries from unconsolidated entities, were 73,087 as of November 30, 2023. The company primarily sells homes in communities targeted to first-time, move-up, active adult, and luxury homebuyers.

The company operates primarily under the Lennar brand name. The key elements of the company’s strategy include everything’s included approach; innovative homebuilding; digital marketing; technology focused; and land light strategy.

Diversified Program of Property Acquisition

The company generally acquires, or obtains options to acquire, land for the development and for the construction of homes that it sells to homebuyers. Land purchases are subject to specified underwriting criteria and are made through its diversified program of property acquisition, which may consist of:

Acquiring land through option contracts, which enables the company to control portions of properties owned by land banks and other third parties or entities in which it has investments until it has determined whether to exercise the options;

Acquiring land directly from individual land owners/developers, or other homebuilders;

Acquiring local or regional homebuilders that own, or have options to purchase, land in strategic markets;

Acquiring access to land through joint ventures or partnerships, which among other benefits, limits the amount of the company’s capital invested in land while helping to ensure its access to potential future homesites and allowing it to participate in strategic ventures;

Investing in regional developers in exchange for preferential land purchase opportunities; and

Acquiring land in conjunction with its Multifamily business.

For the last several years, the company has been reducing its reliance on land it owns and increasing its access to land through options and joint ventures, most significantly through its use of land banks which is a critical part of its operating strategy.

Construction and Development

The company involves in all phases of planning and building in its residential communities, including land acquisition, site planning, preparation and improvement of land and design, construction and marketing of homes. The company uses independent subcontractors for most aspects of land development and home construction. As of November 30, 2023, the company was actively building and marketing homes in 1,260 communities, including five communities being constructed by unconsolidated entities. As of November 30, 2023, the company had about 1,200 completed unsold homes.

The company supervises and controls the development of land and the design and building of its residential communities with a relatively small labor force. The company hires subcontractors for site improvements and virtually all of the work involved in the construction of homes.

Marketing

The company offers a diversified line of homes for first-time, move-up, active adult, luxury and multi-generational homebuyers in a variety of locations ranging from urban infill communities to suburban golf course communities. The company’s Everything’s Included marketing program enables it to differentiate its homes from those of its competitors by, including luxury items as standard features at competitive prices, while reducing construction and overhead costs through a simplified construction process, product standardization and volume purchasing. In addition, the company includes built in wireless capability, home automation and solar power in many of the homes it sells, which enhances the company’s brand and improves its ability to generate traffic and sales.

The company sells its homes from models that it has designed and constructed. The company employs new home consultants who are paid salaries, commissions or both to conduct on-site sales of its homes. The company also sells homes through independent realtors. The company has made it possible for potential homebuyers to take virtual tours of model homes. During the year ended November 30, 2023, even with shifts in macroeconomic factors and adjusting to the recent inflationary environment, the company was able to develop, enhance, use, and improve the Lennar machine. The company’s sales, marketing, and dynamic pricing machine is quickly becoming an advanced digital engine that has materially benefited from aggressive, focused use and engagement while the market was most difficult.

The company’s marketing strategy has increasingly involved advertising through digital channels, including real estate listing sites, paid search, display advertising, social media and e-mail marketing, all of which drive traffic to its website, www.lennar.com. This has allowed the company to attract more qualified and knowledgeable homebuyers. However, the company also continues to advertise through more traditional media on a limited basis, including newspapers, other local and regional publications, radio and on billboards where appropriate. The company tailors its marketing strategy and message based on the community being advertised and the customers being targeted, such as advertising its active adult communities in areas where prospective active adult homebuyers live or will potentially want to purchase. During the year ended November 30, 2023, significant increases in interest rates made the company’s homes less affordable to many prospective buyers and led it to reduce prices or increase sales incentives in a number of its communities to maintain sales pace.

Homebuilding Investments in Unconsolidated Entities

The company creates and participates in joint ventures that acquire and develop land for its homebuilding operations, for sale to third parties or for use in the ventures' own homebuilding operations. As of November 30, 2023, the company had equity investments in 48 active homebuilding and land unconsolidated entities.

Financial Services segment

Residential Mortgage Financing

The company offers conforming conventional, FHA-insured and VA-guaranteed residential mortgage loan products and other home mortgage products primarily to buyers of its homes through its financial services subsidiary, Lennar Mortgage, from locations in most of the states in which it has homebuilding operations. For the year ended November 30, 2023 (fiscal year 2023), the company’s financial services subsidiaries provided loans to 81% of its homebuyers who obtained mortgage financing in areas where it offered services. Because of the availability of mortgage loans from its financial services subsidiaries, as well as from independent mortgage lenders, almost all creditworthy potential purchasers of its homes have access to financing.

During the year ended November 30, 2023, the company originated approximately 47,000 residential mortgage loans. Substantially all of the residential mortgage loans the company originates are sold within a short period in the secondary mortgage market, a majority of them on a servicing-released, non-recourse basis. During the year ended November 30, 2023, the company also locked interest rates on approximately 46,600 residential mortgage loans.

The company finances its mortgage loan activities with borrowings under its financial services warehouse facilities or funds from its operating activities. As of November 30, 2023, Financial Services had five warehouse residential facilities maturing at various dates through fiscal 2024.

The company has been using new technology to automate portions of its mortgage loan origination process. This new technology has made the mortgage financing process easier for homebuyers and improved the customer experience. This new technology has also enabled the company to increase the number of digital closings, with digital document signing and, where legally permitted, digital notarization.

Title, Insurance and Closing Services

The company is licensed to provide title insurance, and closing services for residential and/or commercial transactions in 41 states to its homebuyers and others. During the year ended November 30, 2023, the company provided closing services with regard to approximately 74,900 real estate transactions in 25 states.

Commercial Mortgage Origination

The company’s LMF Commercial subsidiary originates and sells into securitizations first mortgage loans, which are secured by income producing commercial properties. LMF Commercial also originates floating rate loans secured by commercial real estate properties, many of which are in transition, undergoing lease-up, sell-out, renovation or repositioning. In order to finance LMF Commercial lending activities, as of November 30, 2023, LMF Commercial had three warehouse repurchase financing agreements maturing at various dates from December 2023 through fiscal 2024.

Lennar Other segment

Strategic Technology Investments

Seven of the companies in which the company has strategic investments are publicly traded. They are:

Blend Labs, Inc. (Blend), a digital lending platform developer simplifying and fast tracking the consumer finance process;

Doma Holdings, Inc. (Doma), a company that built a predictive analytics platform for title insurers;

Hippo Holdings, Inc. (Hippo), a company that provides an efficient means of obtaining home insurance;

Opendoor Technologies, Inc. (Opendoor), a company that uses technology to significantly streamline the homebuying and selling process;

SmartRent, Inc. (SmartRent), an enterprise smart home automation company;

Sonder Holdings, Inc. (Sonder), a company that manages short-term rentals, such as rental hotels; and

Sunnova Energy International, Inc. (Sunnova), a leading national residential solar company, to which during 2021, the company sold its solar power business in return for equity.

Multifamily segment

The company’s Multifamily business has been engaged in the development of multifamily communities since 2011. Initially, the Multifamily business almost exclusively participated in shorter-duration joint ventures that built multifamily communities with the intention of selling them soon after they were built, and in most cases after they were substantially occupied. However, the Multifamily business manages, and owns interests in, longer-duration funds that build multifamily communities with the intention of retaining them as rental income-generating assets. As of November 30, 2023, Multifamily had interests in, and was managing, three funds and 22 joint ventures.

From inception through November 30, 2023, the Multifamily business has capitalized and developed 119 multifamily residential communities with approximately 35,900 rental units across 20 states throughout the United States. The communities developed by the Multifamily business include a diversified mix of conventional garden, mid-rise and high-rise multifamily properties in urban and suburban locations near major employment centers. Most communities offer residents a mix of studio, one, two, and three-bedroom homes.

As of November 30, 2023, funds and ventures managed by Multifamily had a pipeline of 48 potential future developments, which were owned, under contract or subject to letters of intent.

Multifamily has co-investments in all the funds and ventures it manages, and receives returns on these investments. In addition, it has carried interests in the funds or ventures it manages, and receives distributions with regard to those carried interests.

Single-Family Home Rentals

In December 2020, Lennar formed the Upward America Venture, LLC (Upward America), which acquires communities of single-family rental properties (including townhomes, duplexes and condominium buildings developed or acquired for rental purposes); and leases and manages homes in those communities. Lennar subsidiaries are the manager and the general partner of Upward America.

As owner of the general partner of Upward America, Lennar has the right to receive, in addition to distributions regarding its own commitments, distributions based on the amounts by which returns to limited partners exceed specified amounts (i.e., carried interests). As the manager of Upward America, Lennar receives management and acquisition fees. Lennar subsidiaries may also receive fees for property management, leasing, construction management and other services that they render through subcontractors.

As of November 30, 2023, Upward America had purchased 4,697 homes in 103 communities across 19 metropolitan statistical areas, of which 4,420 of the homes owned by Upward America had been leased to occupants. The Limited Partnership Agreement of Upward America gives Upward America the right to purchase from Lennar for their appraised value all homes or communities that are purpose built by Lennar for single-family home rental. Upward America also is free to purchase homes from homebuilders other than Lennar or to purchase previously occupied homes. Initially all the homes purchased by Upward America were purchased from Lennar, but subsequently, Upward America began purchasing homes from multiple homebuilders. As of both November 30, 2023, approximately 6% of the homes owned by Upward America were built by homebuilders other than Lennar.

Five Point Holdings, LLC

The company owns an indirect approximately 40% interest in FivePoint, which is a publicly traded developer of three large master planned mixed-use developments in California (Newhall Ranch, Great Park Neighborhoods, and San Francisco Shipyard/Candlestick Point). The company sometimes purchase properties from FivePoint for use in its homebuilding operations.

Seasonality

The company historically has experienced, and expect to continue to experience, variability in quarterly results. The company’s homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in its second and third fiscal quarters (year ended November 2023) and increased deliveries in the second half of its fiscal year.

Regulation

In order to make it possible for some of the company’s homebuyers to obtain FHA-insured or VA-guaranteed mortgages, the company must construct the homes they buy in compliance with regulations promulgated by those agencies. The company is also subject to regulations promulgated by the Federal Consumer Financial Protection Bureau regarding residential mortgage loans.

History

Lennar Corporation was founded in 1954. The company was incorporated in 1961.